Legislature(2003 - 2004)

02/21/2003 03:15 PM House L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
HB  91-RETIRED PEACE OFF.COLA/MEDICAL BENEFITS                                                                                
Number 0116                                                                                                                     
CHAIR ANDERSON  announced that the  only order of  business would                                                               
be a hearing for  HOUSE BILL NO. 91, "An Act  relating to a cost-                                                               
of-living  allowance  and  medical  benefits  for  retired  peace                                                               
officers after 20 years of credited service."                                                                                   
CHAIR  ANDERSON, as  sponsor of  HB 91,  testified that  the bill                                                               
provides  parity of  employee medical  benefits and  enhances the                                                               
retention of peace officers.   He explained that the normal state                                                               
employee retirement is  30 years, at which  time medical benefits                                                               
are immediately  activated.  The normal  peace officer retirement                                                               
is 20 years, but medical  benefits are not available immediately.                                                               
They are  withheld until the  person works an additional  5 years                                                               
or  reaches the  age of  60 years.   House  Bill 91  corrects the                                                               
delay  by  allowing  peace  officers  to  receive  their  medical                                                               
benefits  upon  normal  retirement, as  other  Public  Employees'                                                               
Retirement System (PERS) recipients do.                                                                                         
CHAIR  ANDERSON also  noted that  the bill  addresses the  Alaska                                                               
cost-of-living allowance  (COLA) for  peace officers.   This COLA                                                               
would be activated after 20 years  of service, rather than at age                                                               
65  under the  current  statute.   He  explained  that with  this                                                               
adjustment,  retired peace  officers would  have an  incentive to                                                               
remain in Alaska, where they  would continue to contribute to the                                                               
public good.                                                                                                                    
Number 0238                                                                                                                     
MICHAEL   FOX,  Public   Safety  Employees   Association  (PSEA),                                                               
identified himself  as a retired  Alaska State Trooper  living in                                                               
Juneau  who  had  worked  in  the Division  of  Fish  &  Wildlife                                                               
Protection, Department  of Public Safety.   He'd retired  in 2000                                                               
after 22 years of service as a Tier I employee.                                                                                 
The committee took an at-ease from 3:20 p.m. to 3:22 p.m.                                                                       
MR.  FOX   presented  background  on   HB  91  in   a  PowerPoint                                                               
presentation  [hard   copy  in   members'  bill  packets].     He                                                               
reiterated that HB 91 amends  state law to grant medical benefits                                                               
and a cost-of-living  allowance to peace officers  after 20 years                                                               
of service  at normal  retirement.  This  bill applies  to people                                                               
hired under Tier II or III of PERS.                                                                                             
CHAIR  ANDERSON reported  that the  bill  covers peace  officers,                                                               
firefighters, chiefs of police,  regional public safety officers,                                                               
correctional  officers,  correctional superintendents,  probation                                                               
officers, and fire chiefs.                                                                                                      
Number 0470                                                                                                                     
REPRESENTATIVE GATTO asked if a Tier  I employee is the same as a                                                               
Plan I employee in the Anchorage Fire Department.                                                                               
CHAIR ANDERSON  suggested asking Guy Bell,  Director, Division of                                                               
Retirement  & Benefits,  Department  of  Administration, when  he                                                               
testifies today.                                                                                                                
MR. FOX  quoted the  mission statement  of the  Public Employees'                                                               
Retirement System:   "On January 1, 1961,  the Alaska legislature                                                               
established  the Public  Employees' Retirement  System (PERS)  to                                                               
attract  and   retain  qualified   people  into   public  service                                                               
employment."   He  explained  that Tier  I  employees were  hired                                                               
between 1961 and  the end of June 1986, and  the COLA and medical                                                               
benefits  available upon  retirement  were  very generous  during                                                               
those years.  In 1986, the  legislature passed HB 252 and created                                                               
Tier II  in PERS.   For employees hired  under Tier II,  COLA was                                                               
payable at age  65 and major medical benefits took  effect at age                                                               
60.   In 2001, the passage  of HB 242 partially  restored medical                                                               
benefits to  retired peace  officers, but only  if they  worked 5                                                               
extra years beyond their 20-year retirement.                                                                                    
Number 0660                                                                                                                     
MR.   FOX  answered   a  question   from  Representative   Gatto,                                                               
explaining that  state law  pays COLA  to benefit  recipients who                                                               
are aged 65 and over.   A peace officer must meet two conditions:                                                               
be at least 65 and retire after 20 years of service.                                                                            
Number 0729                                                                                                                     
MR. FOX stated that the  Department of Administration fiscal note                                                               
[projects  a  cost of]  $1,224,000  annually,  funded by  a  0.18                                                               
percent increase  in the employer's  contribution.   He explained                                                               
how the State of Alaska  employer contribution for peace officers                                                               
has varied over the years.   It reached its highest level in 1994                                                               
at 17.22 percent, and declined to  7.1 percent through 2003.  The                                                               
proposed  increase  of  0.18 percent  would  raise  the  employer                                                               
contribution of  8.42 percent for  the year 2004 to  8.6 percent.                                                               
For  a person  with a  $55,000 salary,  an 0.18  percent increase                                                               
would cost the employer $99.                                                                                                    
MR.  FOX said  current law  undermines  the intent  of the  peace                                                               
officers'  20-year  retirement  because it  denies  them  medical                                                               
benefits  unless they  work  an  extra 5  years.    He said  this                                                               
feature  inhibits  recruitment  and   lowers  morale.    Mr.  Fox                                                               
referred to a  graph that illustrates the  turnover for troopers,                                                               
corporals, and  sergeants in  the Alaska  State Troopers  for the                                                               
past 21 years.   After 12 years of state  service, 50 percent are                                                               
working and  50 percent have  either separated or  been promoted.                                                               
In the first 8 years of  service, he said, the retention rate has                                                               
been steady,  but starting  at 10 years  of employment  there has                                                               
been a decline.                                                                                                                 
MR.  FOX presented  another  chart that  depicted  the number  of                                                               
Alaska  State  Troopers,  corporals,  and sergeants.    Some  237                                                               
troopers out of 315 total have  less than 10 years' experience in                                                               
the job.   He said there's  a dramatic dropout of  troopers after                                                               
10 to 15 years of service.                                                                                                      
Number 1009                                                                                                                     
CHAIR  ANDERSON  commented  that   the  Public  Safety  Employees                                                               
Association  credits  these  separations to  transfers  to  other                                                               
federal or local agencies, the  private sector, or simply leaving                                                               
law enforcement  completely.  He  added that PSEA  attributes the                                                               
majority of these separations to dissatisfaction with benefits.                                                                 
MR.  FOX said  PSEA staff  found that  the younger  troopers were                                                               
enthusiastic about their  jobs; many didn't even  know what their                                                               
retirement benefits were.  When  troopers have worked 8-10 years,                                                               
however,  they start  looking into  their future.   He  said when                                                               
troopers  are in  their early  thirties, other  job opportunities                                                               
come  along because  they are  well trained,  well educated,  and                                                               
good employees.                                                                                                                 
Number 1105                                                                                                                     
CHAIR  ANDERSON  commented  on  the high  burnout  rate  for  law                                                               
enforcement employees.                                                                                                          
MR. FOX  confirmed that the  policy of the 20-year  retirement is                                                               
related to  this higher burnout  rate.  He  said 20 years  is the                                                               
standard  retirement  for  peace  officers  and  firemen  in  the                                                               
federal government  and in other  states.  Mr. Fox  described the                                                               
results of his  personal poll of a number of  state troopers.  He                                                               
said he'd asked  whether they would serve out their  20 years and                                                               
whether that  probability would increase if  medical benefits and                                                               
COLA  were available  at  a 20-year  retirement.   Fifty  percent                                                               
responded that they'd  make it to 20 years; if  the benefits were                                                               
changed, troopers said  there was a 80 to 90  percent chance that                                                               
they'd stay through their 20 years.                                                                                             
Number 1301                                                                                                                     
REPRESENTATIVE  GATTO   asked  whether  other  workers   such  as                                                               
teachers,  custodians,   and  ferry  workers   experience  career                                                               
MR. FOX replied that many  teachers experience a similar burnout,                                                               
but that he couldn't speak to other occupations.                                                                                
Number 1378                                                                                                                     
MR. FOX said PSEA looked at  the costs of recruiting and training                                                               
peace officers.   He said  PSEA asserts  that if an  employer can                                                               
retain employees  beyond 6 years  to the 20-year  retirement, the                                                               
agency gets a better return  on its training investment.  Typical                                                               
recruitment is  costly because it includes  written testing, oral                                                               
and written  exams with psychologists, polygraph  tests, physical                                                               
agility and fitness testing, physical  health exam, drug testing,                                                               
and  extensive  background  investigations  by  applicant  review                                                               
MR. FOX  said standard training  includes academy  attendance and                                                               
field  training.     Specialized  instruction  is   critical  for                                                               
firefighters  and policemen,  and covers  the use  of helicopters                                                               
and  boats,  handling  bombs,  canine   work,  and  dealing  with                                                               
hazardous materials.   When an  agency loses employees,  it loses                                                               
all the money it has invested in them, he added.                                                                                
Number 1461                                                                                                                     
CHAIR ANDERSON noted that he'd  requested information on training                                                               
costs  from  William  Tandeske,   the  new  commissioner  of  the                                                               
Department  of  Public Safety.    He  said Commissioner  Tandeske                                                               
indicated he  would provide  this research  as soon  as possible.                                                               
Chair  Anderson  said  it's  important  to  weigh  the  costs  of                                                               
recruiting and training  new employees who fill  the positions of                                                               
those who leave  in the middle of their tenure  for other jobs or                                                               
better benefits.   He said  the fiscal  note carries a  cost, but                                                               
it's important to measure this  cost against training funds lost;                                                               
he suggested the result  may be a wash or even  a savings.  Chair                                                               
Anderson said  he hoped  this information  would be  available to                                                               
the House Finance Committee when it considers HB 91.                                                                            
Number 1507                                                                                                                     
MR. FOX explained  why the 20-year retirement  for peace officers                                                               
is standard  across the country.   As a police officer  ages, the                                                               
person  is compensated  at  a higher  rate;  there are  increased                                                               
health problems and increased risk  of injury, and low morale and                                                               
burnout are increasingly common.   He said these factors are well                                                               
documented.    One   career  problem  for  a   peace  officer  is                                                               
illustrated  in   a  chart   of  administration   versus  officer                                                               
positions.   He said that in  many careers, an employee  can move                                                               
from rough-and-tumble  fieldwork into the desk  section, but this                                                               
is a  limited option for  most peace  officers.  For  example, in                                                               
the Department of Corrections, 709  correctional officers work on                                                               
the  floor  of  the  prisons;  in contrast,  there  are  only  30                                                               
positions in  administration.  All  of these employees  are peace                                                               
officers, but the vast majority have  jobs on the floor, which is                                                               
a very tough place to spend 25 years, he pointed out.                                                                           
Number 1593                                                                                                                     
CHAIR  ANDERSON  emphasized   that  correctional  officers  would                                                               
benefit the most by HB 91.                                                                                                      
MR. FOX  continued explaining  the administration-versus-officers                                                               
chart.   He  pointed  out that  to find  less  stressful work,  a                                                               
person  can move  into an  administrative position  or leave  the                                                               
agency completely.                                                                                                              
MR.  FOX commented  on  the broader  benefits  of paying  retired                                                               
peace officers the  COLA.  When retired peace  officers remain in                                                               
Alaska  after retirement,  they  often use  their experience  and                                                               
training in security  jobs and frequently do volunteer  work.  He                                                               
concluded by saying that current  state law undermines the intent                                                               
of normal 20-year retirement for  peace officers and inhibits the                                                               
PERS  mission  of  recruiting and  retaining  peace  officers  in                                                               
public  service.    He  said   HB  91  restores  a  true  20-year                                                               
retirement to peace officers.                                                                                                   
Number 1684                                                                                                                     
REPRESENTATIVE  ROKEBERG  asked  about   the  fairness  of  peace                                                               
officers'  receiving  COLA  immediately  upon  retirement,  while                                                               
other retirees are required to wait until they are aged 65.                                                                     
MR.  FOX replied  that he  would be  delighted if  every employee                                                               
received Alaska COLA upon retirement.   This bill addresses peace                                                               
officers, but he  said he would favor an amendment  that gave all                                                               
retirees COLA upon retirement.                                                                                                  
CHAIR ANDERSON clarified that it  would be good to retain firemen                                                               
and  police  officers  in Alaska  because  of  their  specialized                                                               
emergency training and record of  being law-abiding citizens.  He                                                               
said he  was not  suggesting that they  were more  deserving than                                                               
other citizens.                                                                                                                 
Number 1739                                                                                                                     
MR.  FOX  mentioned  that  retired   peace  officers  often  fill                                                               
security positions on the Trans-Alaska Pipeline System.                                                                         
CHAIR  ANDERSON  theorized  that  there are  many  retired  peace                                                               
officers in  the Alaska  Air National Guard  and the  Alaska Army                                                               
National Guard.                                                                                                                 
Number 1784                                                                                                                     
REPRESENTATIVE ROKEBERG said the COLA  is an incentive for former                                                               
state  employees to  remain  in  the Alaska,  where  the cost  of                                                               
living is high.   State law requires  that a person has  to be 65                                                               
years of age or  older to qualify for COLA.   He said he believes                                                               
this  additional  benefit  should  go  only  to  people  who  are                                                               
actually retired  and are  limited in their  ability to  work and                                                               
make additional  income.  He  observed that people who  retire at                                                               
20 years are probably going to take other work.                                                                                 
Number 1837                                                                                                                     
MR. FOX  replied that  the COLA  issue is  a matter  of retaining                                                               
retired peace  officers - their  skills and their paychecks  - in                                                               
the  state.   If they  are  going to  work, they  will use  their                                                               
skills somewhere, he surmised, either  in Alaska or in some other                                                               
REPRESENTATIVE ROKEBERG commented that  he doesn't understand the                                                               
concept  that  extra-special  people with  extra-special  talents                                                               
should be paid  extra money.  He said he  objects to the practice                                                               
of accumulating multiple retirement benefits.                                                                                   
MR. FOX confirmed that most  people who retire from peace officer                                                               
work  find  employment  in  some   other  area.    From  personal                                                               
observations,  he said  most retirees  do  seasonal or  part-time                                                               
work,  for example,  oil  pipeline  jobs with  month-on/month-off                                                               
Number 2005                                                                                                                     
REPRESENTATIVE  GATTO  asked  about  the conflict  in  Mr.  Fox's                                                               
statement  that  he'd  retired  to   spend  more  time  with  his                                                               
children, while most peace officers  pursue other jobs after they                                                               
MR.  FOX explained  that he's  an exception  to the  pattern he'd                                                               
described for most peace officers.                                                                                              
Number 2042                                                                                                                     
CHAIR   ANDERSON   recounted   Commissioner   Tandeske's   recent                                                               
presentation to  the House  Judiciary Standing  Committee, during                                                               
which  he'd described  how difficult  it is  for law  enforcement                                                               
agencies   across  the   nation  to   recruit  police   officers,                                                               
correctional officers, and, to a  lesser extent, firefighters and                                                               
paramedics; Commissioner Tandeske had  stated that as budgets are                                                               
cut,  agencies still  have  to offer  incentives  to recruit  and                                                               
retain top-quality peace officers.                                                                                              
Number 2114                                                                                                                     
REPRESENTATIVE ROKEBERG  asked how  granting medical  benefits at                                                               
20  years  instead  of  25  years  would  assist  in  recruitment                                                               
efforts.   He said the testimony  shows that people in  the first                                                               
10 years hardly look at their retirement benefits.                                                                              
Number 2178                                                                                                                     
REPRESENTATIVE  GUTTENBERG explained  that he  has had  a similar                                                               
experience in the construction field.   As a high school student,                                                               
he  started with  a summer  job,  never imagining  that he  would                                                               
eventually retire  from the  construction industry.   He  said he                                                               
found that after 10 years in  the industry, he was more likely to                                                               
stay until  retirement if it  was 10  years rather than  15 years                                                               
MR. FOX  described how  a person starting  a law  enforcement job                                                               
"tries on"  the profession.   When  there are  tough experiences,                                                               
the person  asks over and over  again, "How long can  I do this?"                                                               
After working  8 to 10  years, the  person looks down  the tunnel                                                               
and says, "I  could make it 10,  but I couldn't make it  15."  He                                                               
said that's  a very common decision  for people in the  middle of                                                               
their careers, because  they're at an age where  if they're going                                                               
to change careers, they've got to do it [soon].                                                                                 
Number 2257                                                                                                                     
REPRESENTATIVE CRAWFORD  said he sees  HB 91  as a means  for the                                                               
legislature  to  retain  highly   trained  individuals.    As  an                                                               
ironworker in his  twenties, he said he was  only concerned about                                                               
the size of  his Friday paycheck; once in  his thirties, however,                                                               
health and retirement benefits became  a bigger factor in whether                                                               
he stayed in the field.                                                                                                         
Number 2307                                                                                                                     
REPRESENTATIVE GATTO  stated that after  10 years as  a paramedic                                                               
in Anchorage, he was  "fried."  There was no way  he was going to                                                               
work 10, 15, or even 5 more  years.  Fortunately, he said, he had                                                               
the opportunity to transfer to the  Anchorage fire line.  When he                                                               
finally  retired, it  wasn't because  of burnout,  but for  other                                                               
TAPE 03-10, SIDE B                                                                                                            
Number 2344                                                                                                                     
REPRESENTATIVE  GATTO   asked  whether  the  retention   rate  is                                                               
different for people who start  their careers at different stages                                                               
of their lives.   He said he  was not convinced that  HB 91 would                                                               
result in  better retention  of peace officers.   He  said people                                                               
jump ship  on their jobs  for a variety  of reasons -  better job                                                               
offers, divorce, or  being tired of Alaska's climate  - that have                                                               
nothing to do with the 20- or 25-year retirement issue.                                                                         
Number 2258                                                                                                                     
MR.  FOX clarified  that the  youngest age  for starting  a peace                                                               
officer career  is in the  mid-twenties, after the  young recruit                                                               
has had a few life experiences.   He described an unsolicited job                                                               
offer that he'd received while working  in Valdez the year of the                                                               
Exxon Valdez  oil spill.   He said  he turned down  the pipeline-                                                               
security  job because  he qualified  for a  full retirement  in 8                                                               
years.   He  said the  5 years  added on  to qualify  for medical                                                               
benefits  make  a   huge  difference  to  a   peace  office  when                                                               
considering such an offer.                                                                                                      
REPRESENTATIVE GATTO  questioned whether  the state  will benefit                                                               
from retaining  a employee another 10  or 15 years if  the person                                                               
doesn't like the job.                                                                                                           
Number 2008                                                                                                                     
MR. FOX  replied that this is  a relevant question when  an peace                                                               
officer  has worked  20 years  and considers  another 5  years to                                                               
qualify for  medical benefits.   He  has seen  it many  times, he                                                               
added:    the worst  employees  stay  because of  fewer  options,                                                               
whereas the good employees have better options and take them.                                                                   
Number 1972                                                                                                                     
REPRESENTATIVE ROKEBERG asked Mr.  Fox to clarify about restoring                                                               
the retirement benefit from 25 years to 20 years.                                                                               
MR.  FOX explained  that Tier  I peace  officers all  receive the                                                               
same benefits  at 20  years that other  employees receive  with a                                                               
30-year  retirement.   When  HB  242 passed  two  years ago,  the                                                               
medical benefit  was restored to  the start of  normal retirement                                                               
for other  employees, but  peace officers  were required  to work                                                               
another  5 years  past  their normal  retirement  to qualify  for                                                               
medical  benefits.   He said  troopers feel  they have  a 25-year                                                               
retirement because  the medical  benefit, which  is such  a major                                                               
part of the retirement package, is not available until then.                                                                    
Number 1926                                                                                                                     
MR. FOX  replied to  a question  from Chair  Anderson, explaining                                                               
that  many retired  peace officers  do background  investigations                                                               
and  provide  various  training services  to  the  Department  of                                                               
Public Safety on part-time or short-term contracts.                                                                             
Number 1867                                                                                                                     
BRIAN  WASSMANN, Sergeant,  Division  of  Alaska State  Troopers,                                                               
Department  of Public  Safety, noting  that  he has  10 years  of                                                               
experience, described law enforcement  as a rewarding career with                                                               
good  pay.   He  said  it's  very  demanding, however,  and  many                                                               
officers  want  to retire  at  20  years.   The  availability  of                                                               
medical benefits at 20 years is  a huge incentive for him to stay                                                               
in the  field.  Many  troopers work  hours that the  normal state                                                               
employees  aren't working  -  weekends,  swing shifts,  graveyard                                                               
shifts  - and  must live  in remote  areas without  the amenities                                                               
available to many Alaskan residents.   He offered his belief that                                                               
HB 91 would  increase the morale of peace  officers and encourage                                                               
them to stay in law enforcement.                                                                                                
Number 1743                                                                                                                     
MR.  WASSMANN  answered  questions from  Representative  Rokeberg                                                               
about pay adjustments  for shift differentials and  overtime.  He                                                               
said the  shift differential is 3  percent for a swing  shift and                                                               
about 7  percent for shifts starting  after 8 p.m.   Overtime pay                                                               
depends on the area  of the state and the time of  year.  He said                                                               
there is less overtime in urban  stations and more in rural posts                                                               
where shifts last 10 hours a  day and troopers are called back to                                                               
work on emergencies.                                                                                                            
Number 1630                                                                                                                     
MR. WASSMANN,  answering a question from  Representative Rokeberg                                                               
about  trooper  salaries,  said his  post  has  a  cost-of-living                                                               
increase,  so he  earns  about $78,000  a  year gross,  including                                                               
overtime  and shift  differentials.   The starting  salary for  a                                                               
trooper in the Palmer-Wasilla area is $40,000 to $45,000 a year.                                                                
Number 1590                                                                                                                     
MIKE   COUTURIER,   Anchorage    Police   Department   Employees'                                                               
Association,  testified  that  his  union  represents  317  sworn                                                               
officers  and  150 nonsworn  employees  in  the Anchorage  Police                                                               
Department (APD).   He is a patrol officer  in downtown Anchorage                                                               
with 7 years  of experience.  Mr. Couturier explained  that he is                                                               
a 20-year retired  army officer who joined  the police department                                                               
at age 38.                                                                                                                      
Number 1510                                                                                                                     
MR.  COUTURIER  explained  that  he'd  set  up  the  most  recent                                                               
recruiting program for the APD.   He said officers after 10 years                                                               
of service  are not tired of  being officers.  He  predicted that                                                               
they will  remain officers but will  move to the Lower  48, where                                                               
the weather and the benefits are  better.  He reported that there                                                               
has  been active  recruiting  of APD  officers  and Alaska  State                                                               
Troopers by representatives  from Vancouver [Washington]; Tacoma,                                                               
Washington; San Diego, California;  and Stockton, California.  He                                                               
opined  that if  peace officers  are certified,  they can  easily                                                               
move  to  new positions,  go  through  a minimal  field  training                                                               
officer program, and  be on their way to  better benefits, better                                                               
pay, and better retirement benefits.                                                                                            
Number 1403                                                                                                                     
MR.  COUTURIER  explained that  at  one  time, the  Alaska  State                                                               
Troopers and the  APD were among the 5 or  10 top-paying agencies                                                               
in  the  U.S.,   but  now  rank  in  the   30s  among  comparable                                                               
jurisdictions.  In 1994, the  Municipality of Anchorage moved out                                                               
of  the  police and  fire  program  Plans  I,  II, and  III,  and                                                               
enrolled  its  officers  in PERS.    Anchorage's  benefits  under                                                               
Tier II deteriorated  significantly.  He said  his union supports                                                               
HB 91 because it wants  to improve the retirement medical benefit                                                               
for purposes of recruiting and retention.                                                                                       
MR.  COUTURIER  noted  that today's  young  peace  officers  have                                                               
laptop computers and access to the  World Wide Web, and are being                                                               
bombarded with  online, magazine, and  telephone job offers.   He                                                               
said  there   is  a   national  shortage   of  police   and  fire                                                               
professionals, along with correctional  officers, that this state                                                               
and every  other state will have  to address.  To  address it, he                                                               
said, the agency must be competitive.                                                                                           
MR. COUTURIER  commented on the  practice of  collecting multiple                                                               
retirements.   He said many in  the field believe that  if fellow                                                               
officers  are willing  to go  through the  high-impact career  of                                                               
policing, firefighting, providing  emergency medical services, or                                                               
guarding  criminals, then  they should  be rewarded  for it.   He                                                               
said the state should reduce  its costs by retaining those people                                                               
for the full  term that they're available.  He  estimated that it                                                               
costs the APD about $100,000 to  train and field a police officer                                                               
through  its own  academy and  the  first year  on the  job.   He                                                               
reported that  the APD  is losing officers  to West  Coast cities                                                               
between 5 and 8 years into their careers.                                                                                       
Number 1211                                                                                                                     
MR. COUTURIER also noted that  the APD is gaining state troopers,                                                               
partly because  the state  and Anchorage are  both part  of PERS.                                                               
As a larger city, Anchorage  offers the advantage to troopers who                                                               
don't want to move around the state.                                                                                            
Number 1157                                                                                                                     
GUY   BELL,  Director,   Division  of   Retirement  &   Benefits,                                                               
Department of Administration, offered  to answer questions on his                                                               
department's fiscal note for HB 91.                                                                                             
Number 1119                                                                                                                     
REPRESENTATIVE ROKEBERG  asked why  the fiscal  note has  only an                                                               
asterisk  in the  fiscal  year  columns, but  an  annual cost  of                                                               
MR.  BELL  replied  that  the   asterisk  was  used  because  the                                                               
$1,224,000 cost  of a  change in the  retirement system  would be                                                               
spread  among  the  personal-services  line items  of  all  state                                                               
agencies;  it's  not a  cost  to  the  Division of  Retirement  &                                                               
Benefits.   He explained that it's  money the state will  need to                                                               
collect and pay to the retirement  fund.  He said roughly half of                                                               
the $1,224,000  would be  general funds.   The $13.45  million in                                                               
accrued  liability  for  the  20-year   period  is  collected  by                                                               
increasing the employer's rate of contribution by 0.18 percent.                                                                 
REPRESENTATIVE   ROKEBERG   asked   whether  this   increase   in                                                               
contribution  applies to  all the  political subdivisions  of the                                                               
state that participate in PERS.                                                                                                 
Number 1047                                                                                                                     
MR.  BELL   replied  that  the  increase   to  various  political                                                               
subdivisions  varies according  to the  number of  peace officers                                                               
REPRESENTATIVE   ROKEBERG   asked   why,  under   the   Tier   II                                                               
calculation,  employers   of  peace  officers  pay   7.5  percent                                                               
compared with [6.7 percent for all] other employees.                                                                            
Number 0947                                                                                                                     
MR. BELL  replied that historically, employers  of peace officers                                                               
have paid  more than for  other employees because  peace officers                                                               
receive benefits  sooner.  The  rate is higher because  the money                                                               
is collected over a shorter period of time.                                                                                     
REPRESENTATIVE ROKEBERG  asked if  there would be  any additional                                                               
cost to the employee for this increased benefit.                                                                                
MR.  BELL confirmed  that the  employee rate  of contribution  is                                                               
fixed in  statute at 6.75 percent  for a normal employee  and 7.5                                                               
percent for  a peace officer.   If there's a change  in benefits,                                                               
the impact is on the employer's rate of contribution.                                                                           
Number 0870                                                                                                                     
REPRESENTATIVE  ROKEBERG   noted  that  there's   no  distinction                                                               
between the COLA and the medical  benefit in the fiscal note.  He                                                               
asked if  there was  a breakout  between the  two items  when the                                                               
calculations were made.                                                                                                         
MR. BELL  replied that he'd  asked the division's  actuarial firm                                                               
about the relative weighting of  the COLA to the medical benefit,                                                               
and  was told  it's about  two-thirds medical  benefits and  one-                                                               
third COLA.                                                                                                                     
Number 0851                                                                                                                     
MR.  BELL,   in  response  to  a   question  from  Representative                                                               
Rokeberg,  said  the other  half  of  the  $1,224,000 -  not  the                                                               
general  fund portion  - consisted  of  CIP [capital  improvement                                                               
project] receipts, federal receipts, and other agency receipts.                                                                 
Number 0794                                                                                                                     
REPRESENTATIVE  GUTTENBERG  inquired as  to  the  average age  of                                                               
entry into the peace officer occupations.                                                                                       
MR. BELL replied  that he didn't have that  information but could                                                               
get  it.   He said  the  average age  of retirement  for a  peace                                                               
officer is about age 52 or 53.   He suggested the average age may                                                               
be different between a trooper and a correctional officer.                                                                      
REPRESENTATIVE  GUTTENBERG  observed  that   50  percent  of  the                                                               
$1,224,000  is  about  $600,000.    He  questioned  whether  it's                                                               
possible to determine a dollar  value for the increased retention                                                               
of peace  officers, the  dollar savings for  not having  to train                                                               
new officers.  He offered  his understanding that the Division of                                                               
Retirement & Benefits doesn't calculate  the training side of the                                                               
equation, but said he would find this an interesting number.                                                                    
Number 0670                                                                                                                     
REPRESENTATIVE  GATTO  opined  that   money  is  being  saved  in                                                               
training, but  that the long-term  employees are being paid  at a                                                               
higher rate.  He  said it might be difficult to  dig out a number                                                               
that compares training dollars saved  with increased salary costs                                                               
and the employer's higher contribution rate.                                                                                    
Number 0628                                                                                                                     
REPRESENTATIVE CRAWFORD  reminded the  committee that  one person                                                               
testified that  it costs  $100,000 to  train an  Anchorage police                                                               
officer.  He  said retaining only a few troopers  [for a $100,000                                                               
savings each] makes the  $600,000 increased employer contribution                                                               
a bargain.                                                                                                                      
REPRESENTATIVE ROKEBERG  asked Mr. Bell  about the intent  of the                                                               
COLA law:   whether it is for older people  who would be retiring                                                               
or for  younger retirees [who  plan to continue working  in other                                                               
jobs while retired].                                                                                                            
Number 0576                                                                                                                     
MR. BELL recounted the statutory history  of PERS.  Up until June                                                               
1986,  anyone   hired  was  eligible  for   COLA  at  retirement,                                                               
regardless of  age.   With Tier  II, for  people vesting  in PERS                                                               
after June  1986, COLA took effect  at age 65.   He surmised that                                                               
rationales for  this legislative  decision included  reducing the                                                               
cost of  the retirement system and  paying the COLA at  the point                                                               
when retirees actually stop working and need the money.                                                                         
REPRESENTATIVE ROKEBERG  asked about  the actuarial  soundness of                                                               
PERS, given the state of the  stock market for the last three and                                                               
a half years.                                                                                                                   
Number 0511                                                                                                                     
MR.  BELL  replied  that  Alaska's   PERS  has  suffered  serious                                                               
declines  in  value, as  has  every  other  pension fund  in  the                                                               
country.  The  division has requested an actuarial  audit to make                                                               
sure that it is costing out  these things appropriately.  He said                                                               
the  division  had  an analysis  done  of  its  investment-return                                                               
assumption to  see if was reasonable.   Mr. Bell said  the system                                                               
is in good shape, but added, "We're in the wrong market."                                                                       
Number 0425                                                                                                                     
MR. BELL  explained how  the PERS  and TRS  [Teachers' Retirement                                                               
System] boards  set the employer  contribution rate.   The boards                                                               
set assumptions.  Then the  actuary uses those assumptions, looks                                                               
at  the  state's  data, produces  asset-liability  modeling,  and                                                               
presents an  expected contribution  rate that employers  would be                                                               
required to  pay two  years hence, for  example, for  fiscal year                                                               
2005 (FY 05).   The retirement boards  individually consider this                                                               
information and then develop the  employer rate.  The boards will                                                               
hear from  the actuaries in  March and  April, and in  April will                                                               
set  an employer  rate for  FY  05, the  [fiscal] year  beginning                                                               
July 1, 2004.                                                                                                                   
MR.  BELL went  on  to  say that  under  state  law, the  largest                                                               
increase that  could occur in  any one  year would be  5 percent.                                                               
Currently, the state's rate averages  7.1 percent, so the largest                                                               
possible rate could be 12.1  percent, a substantial increase.  He                                                               
said  he  didn't  know  whether the  boards  would  increase  the                                                               
employer contribution rate.                                                                                                     
Number 0351                                                                                                                     
MR. BELL predicted that the  relative funded status of the system                                                               
would  decline.   He  said Alaska  is unusual  because  it has  a                                                               
pension  benefit  and  a  medical  benefit,  both  of  which  are                                                               
prefunded  through the  valuation process.   Alaska  is the  only                                                               
state retirement system in the  country that prefunds its medical                                                               
benefit, a prudent  thing to do, he noted.   If it didn't prefund                                                               
the medical benefit,  Alaska would be over 100  percent funded in                                                               
PERS.  He  explained that if Alaska shut the  program down today,                                                               
it could pay  100 percent of all benefits that  have been accrued                                                               
to date.   Including the medical benefit liability,  PERS will be                                                               
funded below 100  percent - he said it's not  known how far below                                                               
100  percent coverage,  but it  could be  substantial.   Mr. Bell                                                               
said it's  prudent to address  a shortfall  in the system  over a                                                               
period of  25 years.   He explained  that the division  uses very                                                               
long  "time  horizons"  because  markets  can  change,  and  it's                                                               
important to avoid knee-jerk reactions to short-term volatility.                                                                
Number 0279                                                                                                                     
CHAIR ANDERSON  asked if  there are any  other groups  that don't                                                               
receive medical benefits immediately upon retirement.                                                                           
MR. BELL replied  that [Tier II] teachers do  not receive medical                                                               
benefits immediately upon retirement.                                                                                           
CHAIR  ANDERSON asked  Mr. Bell  to reiterate  on the  record the                                                               
purposes of offering a COLA or a medical benefit.                                                                               
MR. BELL responded that the  purpose of offering medical benefits                                                               
and COLA  is very clear  in the statute:   to attract  and retain                                                               
qualified public employees.                                                                                                     
Number 0190                                                                                                                     
REPRESENTATIVE  ROKEBERG asked  about  the employer  contribution                                                               
rate for the FY 04 budget.                                                                                                      
MR. BELL  replied that the  FY 04  contribution rate is  based on                                                               
the surplus  that had been built  up over the good  times.  There                                                               
was a very  small increase in retirement system rates  from FY 03                                                               
to  FY 04,  less  than a  0.5 percent  increase  overall for  the                                                               
REPRESENTATIVE ROKEBERG  asked Mr. Bell  if he thinks  there will                                                               
be  a  serious increase  in  the  employer contribution  rate  in                                                               
FY 05.                                                                                                                          
MR. BELL replied  that that decision is up to  the [PERS and TRS]                                                               
retirement  boards.   He  estimated, in  further  reply, that  an                                                               
increase in the employer contribution  rate could range from 0 to                                                               
5 percent.   He calculated  that a 5  percent increase on  a $680                                                               
million personal-services  budget would  be roughly  $30 million,                                                               
with half that, or $15 million, being GF [general fund].                                                                        
TAPE 03-11, SIDE A                                                                                                            
Number 0009                                                                                                                     
REPRESENTATIVE  ROKEBERG  remarked  that  Alaskans  shouldn't  be                                                               
surprised  that there  will be  recommended funding  increases in                                                               
PERS,  because  Alaska  is  in  the  same  boat  as  the  private                                                               
companies that are having trouble funding their pension plans.                                                                  
Number 0027                                                                                                                     
MR.  BELL  agreed  and  said  other  states  are  having  similar                                                               
problems.  He said the State  of Arizona is looking at increasing                                                               
its  employer rate  by  5 percent  starting in  July.   And  some                                                               
states  are reacting  more strongly.   He  said Alaska  was in  a                                                               
healthy  position  to  begin  with,  whereas  some  systems  were                                                               
already underfunded when the [stock] market  was way up.  And now                                                               
that there's  been a significant  decline, they're in  much worse                                                               
shape than Alaska.                                                                                                              
REPRESENTATIVE ROKEBERG  said the goal  of HB 91 is  laudable and                                                               
that it's important  to honor peace officers who  put their lives                                                               
on the line every  day.  He said he wants to  help with the bill,                                                               
but it's  going to be  very difficult to fund  it.  He  asked Mr.                                                               
Fox whether  he would consider  removing the COLA  provision from                                                               
the bill if  it gives the medical provision  a better possibility                                                               
of passage.                                                                                                                     
Number 0215                                                                                                                     
MR. FOX  replied yes,  that if the  choice were  medical benefits                                                               
with no  change in the COLA,  that would be acceptable.   He said                                                               
the medical  benefits are  much more important  than the  COLA to                                                               
the peace officers of the state.                                                                                                
REPRESENTATIVE ROKEBERG explained  that he is not  going to offer                                                               
an amendment at this point.                                                                                                     
MR.  FOX  said  the  PSEA  would be  receptive  to  an  amendment                                                               
removing the COLA from HB 91.                                                                                                   
Number 0309                                                                                                                     
REPRESENTATIVE ROKEBERG said he  was extremely concerned with Mr.                                                               
Bell's comments  about increases in the  employer contribution to                                                               
the payroll  system, even  without HB  91's change  to PERS.   He                                                               
said he sees the fiscal "train  wreck" coming, and that the costs                                                               
of this bill add to the problem.                                                                                                
REPRESENTATIVE CRAWFORD recalled that Mr.  Bell had talked to the                                                               
committee before  about these issues.   He said  legislators know                                                               
the train wreck is down the road.                                                                                               
CHAIR  ANDERSON  commented that  when  the  train wreck  happens,                                                               
citizens will want firemen and police there.                                                                                    
REPRESENTATIVE GUTTENBERG  remarked that  he would prefer  to see                                                               
Alaska's retired  peace officers patrolling the  oil pipeline and                                                               
other facilities.  He said that's what COLA represents.                                                                         
Number 0486                                                                                                                     
REPRESENTATIVE GUTTENBERG moved to report  HB 91 out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
note.   There being  no objection,  HB 91  was reported  from the                                                               
House Labor and Commerce Standing Committee.                                                                                    

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